Let’s face it, brokers have been under the pump since the Covid Stamp Duty holiday, nearly four years ago – then we had the repercussions of “Trussenomics” and soaring inflation, which led to huge interest rate hikes.
Whilst it is hoped base rate will fall soon, a hugely volatile Swaps market has added to the perfect storm creating a landscape of incessant rate changes with lenders adjusting their offerings at the drop of a hat.
The lenders will argue that managing their hedge positions is complex and that brokers who engage the consumers on the front line, don’t fully understand how it all works.
I don’t dispute this, but now the world has returned to real interest rates, lenders are making money hand over fist. Many lenders I have spoken to in 2024 all agree that this year is the year of business retention, and why wouldn’t they?
What is the point of letting lending walk out the door, which loses business and can be fraught with danger, especially when most remortgages either complete on time or not, at the mercies of the free legals cohort. Super cheap borrowing was prevalent in the UK for a generation, but we all know those days are over.
Borrowers have been facing rate shocks for two years now and we still have a long way to go with this phenomenon. Consumers are contacting brokers way in advance of the end date of their deals now, often more than six months ahead of time. Brokers have to engage these clients with a full discussion about the interest rate landscape and come up with a solution. Quite often it might start as a product transfer (PT), then it changes to a remortgage, then back to a PT and so on – the workload is intense. Any good broker worth their salt will monitor rates for the client for a whole six months before a conclusion.
It is hugely time consuming and the broker is often unable to charge a fee, just having to make do with a 0.2% proc fee. If I analyse my business performance in 2023. We lent £131m through 388 applications of which 51% were PTs. The top six lenders accounted for £82.5m, or 63% of our overall lend, 64% of all our PTs.
Only one of the big six lenders, namely Halifax, have rewarded brokers with a much higher procuration fee. Now, in a transparent world brokers must not display lender bias, but this itself, could be tempting to many, so brokers should tread carefully. Thankfully Halifax, for many years, have understood the need for brokers to be adequately rewarded for all business. Many of the smaller lenders pay 0.3% or 0.35% on PTs, which is greatly appreciated.
With the exception of one lender out of the top six, the remainder stubbornly stick to only paying 0.2% despite all of them making billions in group profits. Mortgages are an integral part of any bank’s product suite and fair reward should be given to those who bring and retain business for them.
Lenders publicise they support a number of initiatives in the financial services space, for example diversity, inclusion, the green agenda and not forgetting mental health, so, they should spare a thought for the mental health of broker firms who, in places, account for up to 85% of a lender’s new business acquisition.
I hear stories of brokers often working late into the night following yet another rate pull and brokers having to sacrifice their own down time to help the clients because they care so much for those loyal customers.
To the big lenders mortgage volumes are purely numbers driven by a desire to make profit for their shareholders. The lenders don’t see our clients the way we do – for us it personal. I have clients and their families going back over 30 years – they rely on brokers like us to be there for them through thick and thin.
If lenders are genuinely concerned about the mental health of the broker community, then do us a favour, be fair to all and pay a respectable procuration fee on product transfers. Looking back on 2023 my own lending volume was down just 6%, yet my fee income was down 26%. In conclusion PT proc fees of 0.2% are simply not fair. Lenders are reliant on our endeavours and if we are treated unfairly how will we be able to recruit new blood into what is already an ageing broker population?
James Lindon-Travers is managing director of Lindon-Travers Associates Ltd
